Please answer after you read the text below . thank you.

Do you think the use of congestion tolls for highways is good public policy? Consider efficiency and fairness issues in your answer and apply concepts described in the text.

For Whom the Roads Are Tolled

If you've ever been caught in a rush-hour traffic jam, you understand what happens when a scarce good has a price of zero. In this case, the scarce good is highway travel, and when the money price of travel is zero, something else must be used to ration the quantity of the good demanded.

During rush hour (and much of the rest of the day in places such as Los Angeles, New York, Seattle, and Atlanta) the "something" that rations travel demand is a time-the time of the motorists caught in traffic.

THE COSTS OF DRIVING

When a person drives a car, he or she generates a variety of costs. First are the private costs of driving, including fuel, oil, vehicular wear and tear, and the value of the driver's time.' These are all borne by the driver, so when deciding whether and how much highway travel to consume, the driver weighs these costs against the benefits of that travel. If these were the only costs of driving, this discussion would end here. Drivers would bear the full cost of their activities, just as the consumers of pizza do, and there would be no other issues to consider. But in most of the world, during parts of most days, driving causes another cost that is not borne solely by the individuals responsible for it.

On any road, after traffic volume reaches some level, additional cars entering the road slow traffic. Once this process called congestion occurs, each added car slows traffic even more. Eventu-ally, traffic can come to a complete halt. In these circumstances, each driver is implicitly using, without paying for it, a valuable resource: the time of other motorists. Unless drivers are made to bear the congestion costs they create, two things must be true. First, the money price of traveling on the road is so low that resources are being wasted. Second, the value of motorists' time spent in traffic is rationing the quantity of travel demanded.

THE BENEFITS OF LESS CONGESTION

Why do economists worry about congestion? Because its existence raises the possibility that the people using the road could be made better off if they were charged a money price for using the road. This money price (called a toll) would induce fewer motorists to drive. Some would carpool, others would use public transit, and still others might telecommute rather than come to the office at all.

The reduced driving would cut congestion and thus conserve the valuable time of those people who continued to drive. In fact, it is even possible that by charging drivers a toll, more people would succeed in reaching their destination in any given time period. It is easiest to see this when traffic is so bad that it comes to a grinding halt. The toll would discourage some people from entering the road, and permit the remaining traffic to move and thus reach its destination. But the general principle holds true even when traffic is just greatly slowed down by the congestion: Road tolls can both improve traffic flow and make drivers better off surely a combination with plenty of appeal for those sick of being stuck in traffic.

WHY NoT TOLLs?

Why, then, don't we see more widespread use of tolls on highways?

There are three reasons. First, toll collection is not free, and until recently, the costs were often large enough to offset many of the benefits. Early toll roads, such as the Pennsylvania and New Jersey turnpikes, were equipped with toll booths that were staffed by attendants twenty-four hours a day. Tolls were paid in cash and traffic had to come to a halt at the booths for payment. This, of course, created some of the congestion that the tolls were supposed to relieve.

But over the last two decades, almost all toll roads have switched to electronic toll collection systems that reduce such costs substan-tally. Small, inexpensive electronic devices called transponders can be installed in cars that use the toll road. The transponders send identifying information to receivers at toll stations that are suspended above the roadway. Toll stations also can be equipped with high-speed cameras to record the license plate numbers of cars passing through the stations.

Either way, cars often need not slow down from cruising speeds to have their identification recorded as they pass through. Regular users keep accounts with the toll authority, from which tolls are deducted as they are incurred. Any motorist without an account receives a bill at the end of the month for her tolls, often with an additional service charge for the billing service.

Under both the camera and the transponder systems, electronic toll collection has drastically lowered the costs of using monetary prices to ration roadway usage. The result has been reduced congestion and improved economic efficiency. Drivers are better off and governments have extra revenue.

GETTING IT WRONG...

The second impediment to pricing highway travel is the sometimes unpredictable consequences of changes in the cost of travel. Unlike a typical privately provided good, each road is part of a network of roads Thus, a change in costs on one segment of the system can sometimes have striking and substantial consequences elsewhere, which can significantly offset the benefits of the tolls.

The island nation of Singapore, for example, experienced some of the worst traffic in the world in the decades after World War II. Hence, its government began experimenting with pricing roads in 1975, starting with a special fee for vehicles entering the central business district during peak traffic periods. When combined with other traffic control measures, the fee helped cut traffic in central Singapore by 45 percent during peak hours, enabling traffic speed to almost double to about 22 miles per hour. But the system had problems, too. For example, just outside the central city, traffic jams got worse, as drivers sought routes they could use without paying. Moreover, on the roads leading into the central city, the drop in rush hour traffic was nearly matched by a share increase in traffic just before 7:30 and after 9:30.

Apart from such network issues, simply predicting how motorists will respond to a particular toll can be difficult. Atlanta, Georgia, for example, in 2011 implemented a "hot lane" on 15.5 miles of Interstate 85, northeast of downtown. Carpoolers can use the lane at no charge, but solo drivers must pay for the privilege. Initially, the city set fares too high to lure drivers from the free lanes, and revenues from the hot lane fell short of projections by almost 40 percent. Indeed, drivers were so irate at the high tolls that many set up Facebook pages to complain

.. OR RIGHT

Sometimes tolls meet with immediate success, as illustrated by the experience of London, England. Beginning in 2003, drivers entering the central area of London were charged a toll (called a "congestion fee") of 5, about $6. The result was a 20 percent reduction in traffic and a consequent increase in average speeds. London's population has steadily increased in the years since, so the congestion fee has been raised as well, and is now 11.50 ($14) per car. Despite having about 10 percent more residents now than in 2003, central London traffic congestion is still much lower than it was before the fee was implemented.

Stockholm, Sweden, instituted a permanent system of tolls in 2007.

Motorists entering or leaving the central city between 6:30 AM and

6:30 PM must pay a congestion tax that varies by time from $2.00 to $4.00. The city estimates that traffic has been cut by 20 to 25 percent, and most residents seem to prefer paying, rather than enduring added congestion.

Despite their early toll woes, Atlanta and Singapore now seem to have sorted things out. In 2012 Atlanta reduced tolls from their high in-tial levels. Travel on the hot lane jumped in response, easing traffic in the other lanes. Revenues from the toll more than doubled and now exceed even the most optimistic early forecasts. Singapore has extended its tolls to cover roads more evenly. It also has smoothed out the large time-based toll hikes that originally had caused motorists to take extreme measures to avoid paying. (Some drivers were simply stopping on the highway to wait out the next scheduled drop in tolls.) And in both cities, complaints about the tolls dried up, as drivers came to appreciate the benefits of paying with money instead of with their time.

THE POLITICS OF PRICING

The third, and perhaps the biggest, impediment to efficient pricing of roads is that most roads are operated by governments rather than by private sector firms. Decisions to price roads must pass through the political process, which necessarily means that the efficiency concerns of the economist are likely to be outweighed by political concerns over who shall pay how much for what. Public opinion polls from densely populated and heavily congested Hong Kong help us understand the consequences.

Although motorists and non-motorists in Hong Kong are almost identical in agreeing that traffic congestion is serious (84.5 percent and 82.0 percent, respectively), they differ sharply in what they think should be done about it. Motorists favor new road construction, presumably because this would shift to taxpaying non-motorists part of the cost of relieving congestion. In contrast, non-motorists believe that financial disincentives to driving (such as tolls and licensing fees) should be given the top priority presumably because this would shift more of the burden to drivers. These divergences of public opinion have slowed the use of private sector remedies for the congestion on publicly owned roads, just as they have elsewhere in the world. The result is too many roads on which monetary prices are too low (or nonexistent) -and thus congestion is too high.

ALTERNATIVES TO TOLLS

For many people, the notion of putting a price on roads seems alien.

Many would argue that if we want to reduce automobile congestion on existing roads, two other methods should be used. The first is to simply build more roads, thus providing more capacity for the cars. The second method is to create or expand mass transit systems, in effect getting some motorists off the roads to leave more room for the remaining ones Indeed, both methods will cut congestion, but only temporarily. As soon as the new roads or mass transit become operational, traffic quickly begins to rise: Some people take more trips, others take longer trips, and still others change jobs or homes to take advantage of the improved traffic flow. Within a few years, congestion becomes as bad as it was before.

Indeed, this process of re-congestion is sufficiently predictable that it now has a name: the Fundamental Law of Road Congestion. Adding 10 percent capacity to the transportation system, for example, simply results in 10 percent more travel, yielding no long-run change in conges-tion. (This doesn't mean that more roads or mass transit are bad after all, they permit more travel. It just means that they produce no long-run cuts in congestion.)

THE LONG-RUN SOLUTION

Politicians probably will never give up road projects or mass transit systems, but the power of prices to cut congestion is becoming better recognized across the country. In the 1990s, Southern California began adding toll roads and hot lanes to its automotive infrastructure. The hot lanes spread elsewhere slowly at first, with only eleven in existence by 2009. But there are more than three hundred miles of them now, and many more, as well as entire new toll roads, are in the works. And the sophistication of the pricing schemes grows each year. The hot lane system in Fairfax, Virginia, is a good example. There, the price per mile traveled varies every fifteen minutes in response to traffic conditions.

When traffic is light, the price is twenty cents per mile, but at the height of rush hour, motorists pay $1.00 per mile for the privilege of smooth, uncongested traveling.

Roughly six thousand miles of U.S. roads now require tolls, which is up 25 percent from a decade ago. As the operators of the toll roads gain more experience in adjusting tolls to traffic conditions, their ability to reduce congestion and spread travel more evenly across the day will grow. And as the experience of London and Singapore and elsewhere shows, pricing schemes can be adjusted to growing population pressures to yield permanent relief from road congestion. The spread of tolls has meant improved economic efficiency, and the revenues from them have reduced pressure to raise taxes to pay for roads. And so, just as the price system enables us to get the food and clothes and shelter we want, so too can it help us get to work on time and keep us cool under the collar.